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Double-check me. Am I okay to retire?
Old 02-23-2017, 10:32 PM   #1
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Double-check me. Am I okay to retire?

Unless I have completely failed math, I believe I'm set for retirement. But please double-check this for me.

Mutual funds: 1.1 million

403b/Roth savings: 141K

Pension: 11K/yr.

Expected yearly spending in retirement: 30K/yr

I know that last figure seems low to most of you big-spenders, but I've been living simply for several decades and have a low-key lifestyle with no dependents, apart from a weiner dog. The figure is based on my 2013 spending, which I added a couple thousand to, just to be more realistic. I also added 7K for retiree health insurance. It still might be a bit of an underestimate, since it doesn't account for rising health care costs or big, occasional purchases like a new car or roof.

I get 100% in Firecalc based on drawing off the mutual funds. My plan, though, is only to draw off mutual funds at 2% for the 4 years between 56 and 60, and otherwise leave them alone, using a combination of pension, 403b/Roth, and Social Security to cover expenses. It works on paper, anyhow. In reality, I'll probably dip into the mutual funds at some point, because, well, what's the point of having the money if you don't use it.

Sound ok?

Am I overlooking something?
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Old 02-23-2017, 10:45 PM   #2
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(30-11)/(1,100+141) = 1.5% WR

You're kidding us, right?

Go party... (1,100+141)*3% WR +11 = 48... let the good times roll.

Add in provisions for major expenditures... eg cost of car divided by useful life, etc., taxes, etc but I think you are fine.
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Old 02-24-2017, 04:35 AM   #3
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Thanks, just making sure. I was originally targeting retiring at 57, but I may well move the date up to 56, which is 6 months away. I guess it felt a little precipitous, and I needed the financial whizzes here to give me the all-clear signal.
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Old 02-24-2017, 05:40 AM   #4
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2.5% withdrawal rate from investments would give you ~$31k/year. 4% would garner just shy of $50k/year. Add in the $11k pension and my only question remaining is why are you still working at all? Enjoy retirement!
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Old 02-24-2017, 05:48 AM   #5
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What are your plans for LTC? LTC is more difficult to live cheaply when you effectively have to employ others.
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Old 02-24-2017, 07:50 AM   #6
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Numbers look good. Two things I'd check before pulling the trigger.
(1) Your success is highly dependant on keeping your expenses down. Be 100% sure that you are comfortable for the rest of your life with this standard of living.
(2) The current value of your current portfolio supports your plan quite well, but "sequence of return" risk worth making sure you are comfortable with. Suggest running a couple "what-if" cases. What if right after you retire, the market takes a large dump like in 2008. This might change your starting portfolio size quite a bit depending on your asset allocation. A high amount in equities cause a large (30-40%) drop in the portfolio value. And it might take awhile to come back. Make sure you are still ok under that circumstance.

BTW - firecalc has a nice feature under the "investigate" tab that allows some specific questions to be answered. For example, I put in the numbers you provided and got (like you did) 100% success rate. Then I reran the calculation with a 30% dip in portfolio value (assumed market drop) and told firecalc to give me the spending rate that would still yield 95% confidence the portfolio would outlast you. Answer was ~25k. Note: I didn't have any income from SS, just the pension income you mentioned at 60 yrs old so your results may be much better.
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Old 02-24-2017, 09:07 AM   #7
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Just curious - what will be your AA as you start retirement? Do you plan on revising it at all to guard against sequence of returns risk that Whisper66 mentions?

Congrats!
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Old 02-24-2017, 09:51 AM   #8
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At what age will you start SS? What do you estimate that amount to be? That should definitely but you over the comfort zone.
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Old 02-24-2017, 11:40 AM   #9
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Yeah, it does look a little conservative, but we all have different comfort levels - there is no WR that everyone can live with. Our WR is pretty conservative (sig line).

You already recognize it, but I'd encourage you to give more thought to those unusual non-annual expenses that can be substantial. You have to buy new cars, replace roofs, replace furniture/appliances/furnaces/air conditioners/electronic equipment, etc. periodically. Our annual budget is $40-50K, and I planned on an average of $10K per year for unusual expenses. We've spent every bit of that so far...
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Old 02-24-2017, 01:13 PM   #10
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Quote:
Originally Posted by bingybear View Post
What are your plans for LTC? LTC is more difficult to live cheaply when you effectively have to employ others.
I don't have any concrete plans. From what I've read, it's not something to consider until you're in your 60s, which is still a ways off for me. I do have advance directives in place, though, and plan to get stronger in that area, so that whatever I have leftover doesn't go to needlessly prolonging my life.

Quote:
Originally Posted by Whisper66 View Post
Numbers look good. Two things I'd check before pulling the trigger.
(1) Your success is highly dependant on keeping your expenses down. Be 100% sure that you are comfortable for the rest of your life with this standard of living.
No problem there. I've been living like this my whole adult life. Never let my lifestyle expand with my income. I enjoy keeping things small and simple.

Quote:
2) The current value of your current portfolio supports your plan quite well, but "sequence of return" risk worth making sure you are comfortable with. Suggest running a couple "what-if" cases. What if right after you retire, the market takes a large dump like in 2008. This might change your starting portfolio size quite a bit depending on your asset allocation. A high amount in equities cause a large (30-40%) drop in the portfolio value. And it might take awhile to come back. Make sure you are still ok under that circumstance.
Yeah, that's a good point. We've had 4 or 5 really nice years in the stock market. What if the market tanks right after I retire?

Well, after the initial panic, I'm sure I could make it. I've got some headroom in my budget, so if I need to cut expenses, I can. It would take a bigger bite out of my principle than I had planned, but there is considerable wiggle room in my plans already, so I think it would be okay. I could also pick up some temporary work, if I felt like it.

Quote:
Originally Posted by Carpediem View Post
Just curious - what will be your AA as you start retirement? Do you plan on revising it at all to guard against sequence of returns risk that Whisper66 mentions?

Congrats!
My current AA is about 60/40. I'm not sure if I'll revise it or not. Some of what I've read on this forum suggests that tinkering doesn't seem to make all that much of a difference. I don't know for sure.

Quote:
Originally Posted by whatnot View Post
At what age will you start SS? What do you estimate that amount to be? That should definitely but you over the comfort zone.
I would plan to start drawing SS at 62. I get estimates of about 16K/yr, but it might be lower, because I think those estimates assume I'm working until 62, whereas I'd be stopping at 56.

Quote:
Originally Posted by Midpack View Post
You already recognize it, but I'd encourage you to give more thought to those unusual non-annual expenses that can be substantial. You have to buy new cars, replace roofs, replace furniture/appliances/furnaces/air conditioners/electronic equipment, etc. periodically. Our annual budget is $40-50K, and I planned on an average of $10K per year for unusual expenses. We've spent every bit of that so far...
Will do. I tracked these unexpected replacement/repair costs pretty carefully in 2012 and 2013, so I have a decent sense of it, but those types of expenses are by definition unpredictable, and some of them (e.g., car) only come along once a decade or so.
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